Hill-Rom (HRC) Estimates Strong Revenue Figures for Q1

Hill-Rom Holdings, Inc. HRC reported preliminary, unaudited revenues of approximately $670 million for the first quarter of fiscal 2018, up 5% year over year and up 3% on a constant exchange rate (CER) basis. The revenue figure is higher than the Zacks Consensus Estimate of $656.4 million, which reflects an improvement of 2.9% from the first quarter of 2017.

Hill-Rom expects fiscal first-quarter adjusted earnings per share (EPS) to surpass the high end of the 77-79 cent band. Notably, the company has excluded the benefits from the latest U.S. tax legislation and other special items from their current EPS expectations. The Zacks Consensus Estimate for first-quarter EPS is pegged at 80 cents.

Meanwhile, the estimate revision trend has been favorable as one estimate moved north over the past two months, with no movement in the opposite direction. In fact, current-year estimates increased by 2 cents to earnings of 80 cents per share. The stock has a Zacks Rank #3 (Hold).

The latest U.S. tax legislation, which slashes the corporate tax rate from 35% to 21%, is anticipated to benefit the company with a one-time net gain of roughly $50−$75 million in the fiscal first quarter. This gain is majorly due to the revaluation of net deferred tax liabilities, partially offset by the repatriation tax. However, the company does not expect this gain to influence adjusted non-GAAP financial results.

Moreover, the company anticipates a decline of 500 basis points (bps) in effective tax rate of around 29% in fiscal 2018.

Share Price Movement

Over the past three months, Hill-Rom has been trading above the broader industry. The stock has rallied 13.7% as compared to the industry’s gain of 6.2%. Hill-Rom has been seeing an increase in revenues on strong international growth. The company is focused on gaining traction in untapped international markets on successful execution of its strategy, an efficient international team and organizational realignment.

We are also upbeat about this leading global medical device company’s focus on expansion through product development which is reflected in the rise in its research and development spending. Last November, Hill-Rom outlined impressive long-term growth strategies along with key initiatives. The company also stated its financial goals through fiscal 2020 which buoy optimism.

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